HI Japan 2017
Innovate to accumulate: Why Japan’s omega-3 firms will benefit from rising China and SEA consumer demand
That's the view of Adam Ismail, executive director of trade body GOED (the Global Organization for EPA and DHA Omega-3), who was speaking at the HI Japan show in Tokyo.
He detailed how omega-3 finished product growth to the end of 2017 would be highest in Asia, with a regional average increase of 11.6%.
This contrasts markedly with the world's largest market, North America, which is projected to grow by just 0.2%.
"Asia is by far the fastest growing region for finished products, and that's why so much of the industry is now focusing on it," he said.
While South East Asia's emerging economies and China are responsible for most of the growth, he added that Japan's relatively mature market was still rising as well.
Finished product growth for the country is expect to reach just below 7% this year, with the per capita expenditure on omega-3 products at a healthy $2.05, the fourth highest globally, behind Australia, Canada and the US.
"Also, if you look at the rest of Asia, there is significant growth potential to get up to the level of spending of other advanced markets, including Japan," added Ismail.
"Developing countries alone could triple the size of the market if per capita spending reaches European levels."
The key to tapping into that growth potential, he said, was developing more consumer-friendly products apart from traditional supplements.
He said the trend towards gummies, emulsions, small pills, and liquids, which started in the US, is now spreading worldwide.
Regionally, he said Japan was a pioneer in this aspect and had the capability to meet rising demand from neighbouring nations.
"Japan has really taken the lead with NPD around innovation and creating more consumer-friendly products," he said.
"There is great demand for the technologies popularised by Japanese companies from China and South East Asia — and that's where the growth is."
He also pointed out that consumers were seeking higher dose formats of EPA and DHA, something that was driving volume growth and the crude oil stage of the value chain.
That said, he cautioned that there were barriers to growth being created by low profit margins at the refiner and concentrator level. The top 15 firms, accounting for over a third of the global market, are believed to have lost $11m altogether in 2015.
"Since 2012, gross margins have been declining significantly, and this is a hindrance to innovation, which is actually what is required for them to grow again," said Ismail.
He added that in the ingredient space, Asia accounted for two-thirds of global growth in omega-3 last year. Japan alone was responsible for an additional 306 metric tonnes of ingredient volume increase.